Sunday, April 23, 2006

There is growing dissatisfaction with outsourcing relationships as per research reports. This dissatisfaction can be attributed to a number of causes, related to both the parties' to outsourcing.

* Unrealistic expectations of the customer due to over promising during sales process. * Divergent interests of the customer and the provider. * Inflexibility to align the outsourcing relationship to the change in business needs. * Cultural gap. * High rate of turnover of people managing the outsourcing process.

Outsourcing is not just a contract signed between two parties. It is a relationship, which has to be managed from day one of the contract. Successful outsourcing relationship requires a lot of professionalism and good management. While fundamentals of good management don't change, the way they are executed changes to a great extent.

Importance of outsourcing relationships

Management of outsourcing relationships is important because it ensures maximum value from the investments made and enables to give world-class services to its customers. World-class service can be provided only if the IT vendor delivers. In effect, the software outsourcing service provider becomes key to the business success of the outsourcing client.

Managing the relationship right at the start

The foundation of successful management of an outsourcing relationship is laid when a company begins to communicate to potential suppliers about its intention to outsource certain functions.

Successful management of outsourcing relationship depends on the way the requirements are defined, the way the objectives are described, the way a vendor is chosen, and the way a Service level agreement is written. The people who are selected to manage the relationship are also of prime importance. Continuous improvement should be defined and expected.

Managing successful relationships requires a new breed of managers

Outsourcing success depends a lot of general management skills rather than technical or operational skills.

* Negotiation skills: To negotiate on a day-to-day basis to keep the services provided in line with the services required. * Communication skills: Outsourcing managers are basically a bridge between the organization's business needs and the providers' services. Communication becomes the essence of a successful outsourcing relationship. * Business skills: To continually understand the changing business needs and aligning the services as per the business objectives.

Involvement of top management

The top management must be involved in reviewing the relationship and giving it a proper direction. Senior management plays a critical role in communicating the reasons and results of outsourcing across the company.

Managing outsourcing relationships like any good management is hard work. It requires constant attention. It requires an expectation of continuous improvement and a proactive approach toward achieving it. Both partners play an equally important role.

Future of Outsourcing

Outsourcing is here to stay. In a highly competitive business environment, companies need to stick to their core competencies and go for strategic outsourcing to reduce their costs and become more effective in their services to their customers. Outsourcing will be looked at as an essential business skill. A companies' success in managing their outsourcing relationship will determine its business success.For Details read here